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Prepare for 'Painful Two Weeks' With 5 ETF & Stock Strategies

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After a worst-ever first quarter, U.S. market saw a sombre start to the second quarter as President Trump cautioned about ‘very painful two weeks’ due to the rapid spread of coronavirus. Note that the United States has the highest number of confirmed COVID-19 cases, with more than 200,000 people infected. No wonder, three key U.S. equity gauges slumped more than 4% at the start of the second quarter.

As expected, the U.S. manufacturing sector shrank in March, with activity hitting its lowest level since 2009, per data firm IHS Markit. Manufacturers also cut their workforce at the sharpest rate since October 2009. Data from ADP and Moody’s Analytics showed U.S. companies cut 27,000 jobs through Mar 12.

Actual losses for the month were far worse, as shown by the record number of jobless claims in the week or Mar 20. Meanwhile, March’s ISM manufacturing index dropped to 49.1, hinting at contraction. A reading of more than 50 marks expansion. There is huge uncertainty about any recovery in the virus contagion scenario and the resultant rebound in demand.

Simply put, the coronavirus pandemic has led to a nationwide shutdown, bringing activities and businesses to a halt. Unemployment has also been soaring.

How Will You Trade Now?

Against this backdrop, all you can do is invest in areas that have stayed steady in Q1 and remained resilient to or have benefitted from the virus outbreak. Below we highlight a few.

Discount Retailers to Win Big in Post-Virus Economy?

Probably yes! If there is a slow U-shaped recovery in the U.S. economy, dollar stores would gain as cash-strapped consumers would find it a better go-to place. JPMorgan analyst Matthew Boss believes thatDollar General (DG - Free Report) and Dollar Tree (DLTR - Free Report) are among the retailers that could grow stronger after the COVID-19 pandemic subsides,” quoted on CNBC. Ross Stores Inc. (ROST - Free Report) is another potential winner, per the analyst.

Dollar General announced to give 10% discount to first responders and invest $35 million in employee bonuses in an environment where many are cutting jobs, bonuses, dividends and buybacks. First Trust Nasdaq Retail ETF and VanEck Vectors Retail ETF (RTH - Free Report) have solid exposure to Dollar General and Ross Stores. Notably, Discount Stores lost 8.7% against S&P 500-based ETF IVV’s 12.2% loss in the past month.

Virus or Not: Work-From-Home Stocks are Long-Term Picks

The work-from-home trend is here to stay. Even if shutdowns are lifted, many service sectors may opt for work-from-home for a longer period of time on convenience basis. Here is where companies like Zoom Video Communications Inc. ZM, which allows individuals to meet and work productively when meeting in-person isn't possible, and CrowdStrike Holdings Inc. CRWD, a provider of cloud-delivered endpoint cybersecurity protection, stand to gain.

Cloud ETFs like WisdomTree Cloud Computing Fund WCLD, Internet ETFs like O'Shares Global Internet Giants ETF OGIG and cyber-security funds like iShares Cybersecurity and Tech ETF IHAK appear as long-term beneficiaries.

Oil’s Pain is Tankers’ Gain

Now that the world is awash with $20-oil and production is still brimming, producers need to store oil and wait for decent prices so that they can break even/lower losses. With storage space running out, U.S. crude producers have to rely on tankers. This in turn boosted Supertanker freight rates as producers, refiners and traders rush to get ships for transport or store the commodity. The second quarter may now be "one of the greatest quarters in history for large crude carriers,” per an analyst. The beneficiaries of the move are DHT Holdings Inc. (DHT - Free Report) and Frontline Ltd. (FRO - Free Report) .

Invest in Stay-at-Home Stocks & ETFs

Ordering food and groceries online, downloading video games, steaming videos will continue to remain hot in Q2. So, Domino's Pizza Inc (DPZ - Free Report) , Netflix (NFLX - Free Report) , Electronic Arts (EA - Free Report) , Take-Two Interactive Software (TTWO - Free Report) , ProShares Long Online/Short Stores ETF CLIX and VanEck Vectors Video Gaming and eSports ETF ESPO should stay afloat amid coronavirus selloffs (read: 2 Solid Reasons to Bet on Video Gaming Stocks & ETFs Now).

Intermediate-Treasuries Good Bets

A few days back, cash-like ETFs were in high demand as coronavirus-led recessionary fears made liquidity the need of the hour. However, those lost appeal with the Fed’s intervention. Yields have been declining mainly for the five-year and seven-year Treasury bonds lately, making those a truly desirable place. iShares 7-10 Year Treasury Bond ETF (IEF - Free Report) and Schwab Intermediate-Term U.S. Treasury ETF SCHR are two winning products (read: Time to Buy Top-Ranked Intermediate Treasury ETFs?).

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